The waste called out

Yeah, a 5600 page Congressional spending bill of course has a lot of waste and nonsense that was rightly called out last night. As for more money flowing from the Magical Money Tree seeded by the Fed and picked over by Congress, the people getting the $600 or maybe now $2000 are those that already have jobs. Extra money of course helps (and Robinhood and DraftKings benefited from the last batch of checks) but it is those without jobs and those businesses that need equity, especially restaurants that need the most amount of help. Either way, I’m sure a bill gets signed and I’m confident that the US economy and the global one for sure, will ramp up quickly in the months to come with the mass vaccine rollout.

The Bank of England chief economist Andy Haldane today asked an interesting question on how the economy unfolds in 2021 with a vaccine. “Is this more like the aftermath of a financial crisis – slow and steady – or is this more like the aftermath of the 1918 flu pandemic or a world war, which elicited a much faster release of pend up demand?” This was also part of a discussion on inflation which nonsensically central bankers want more of. Haldane said “The last thing the world needs right now is a nasty inflation surprise” and if there is a rise above their 2% target, “we’d be super vigilant, with so much monetary stimulus and fiscal stimulus having been put in the system, that this doesn’t show up in any more medium term measures.” My readers know that higher inflation I believe is the biggest risk to markets in 2021 at the same time the economy ramps up. We certainly learned in 2020 that the economy is not the markets and vice versa.

I never write about what the Bank of Thailand does but I’ll say today they kept their overnight rate unchanged at .50% as expected. I highlight it to point out that it is only developed world central banks that have gone whole hog on NIRP, ZIRP and QE and ironically the emerging world’s central bankers barely went there. We thus have to question who then is really developed and who is still developing.

The only thing of note in Europe was better than expected December confidence data out of Italy. Economic sentiment went from 83.3 to 87.7 led by manufacturing and services. But we still saw m/o/m declines in construction and retail confidence. The status of restrictions are certainly roiling parts of the economy but at least the manufacturing side has been kept open. The Italian MIB is up .5% today but is still down 7% year to date. Central banks can’t help all stock markets as the Euro STOXX 600 is lower by 6% year to date. The European bond market is really the only asset class that has benefited from ECB largesse.

ITALIAN ECONOMIC SENTIMENT